Why Sky Bought ITV — And What It Means for Sports Broadcasting

0:06Hello, everyone, and welcome back to the next episode of Streamtime Sports. My name is Chris Stone. I'm the community lead joined as always by our CEO, Nick Meacham. Now, Nick, here in Europe, we're in the midst of a heat wave. And one of the things always on social media is I see Americans calling people in London, in particular, and the Brits, just pansies for not being able to handle the heat. But Nick, you come from a very hot country. And while most people don't think of Ohio as being hot, it's been 100 degrees for the last week with 100 % humidity. It gets very hot. But, Nick, are you on the same page as me that our friends across the pond are wrong to judge British people in particular and Europeans for their inability to handle the heat?

0:47Because having been over here, it is a little bit different. It is not the same. It is a bit different. I think the difference is that definitely the housing, the houses are not built to withstand that heat. Like I remember when I was living in London, my house in the middle of the night would be hotter than it was during the day. Somehow they retain all the heat and they don't let it out because they're not used to being in that hotter climate. And whereas like living, for example, in Sweden when it's hot, but it's inside, they're so well insulated, you don't have that same type of impact. And I imagine, and if you look at the housing in the UK, quite often it's pretty old.

1:26A lot of the buildings here, they're not built with the same insulation regulations, I don't think. So I guess that definitely plays a pretty key role. When I lived in Australia, the hottest conditions I lived in, I can't remember the exact number. It was close to 50 degrees in the desert, Celsius. So what's that? Like 110s, something like that, Fahrenheit? Yeah, it was pretty chunky. we got a day off school that time but it wasn't too bad because if you're in the shade in the desert it's much cooler so the climate was more a bit like what you get in northern Europe but when I was living in the Gold Coast and in the tropical environment, yeah if you were in the mid 30s it felt like nearly it was 50 if you're in the heat and the air is so hot and humid and muggy that wasn't as good of an experience so look I think everyone likes to point fingers and call people out for stuff but I do think there's definitely something in particularly in the uk with how housing is that makes it tougher to withstand like 34 degree 35 degree heat in celsius obviously we're bouncing between fahrenheits and celsius here but i think people will get we'll get the gist yeah well then there's no air conditioning over here in the uk for the most part you might get it in some commercial real estate but you're not going to get it in many personal places not a lot of pubs and the other thing is like americans drive everywhere like in london like i'm sorry like i just yeah i cycle in this weather i don't get on the tube like no thank you i remember when i worked at the cinemas growing up that uh when there was the hot the hot days were the ones where we would have like the best attended people buying the most tickets and coming to the cinemas just to cool down to get in the air conditioning because it was so so hot like australia's got a pretty robust air conditioning ecosystem and industry there but still people who didn't have it would go just for a bit of respite in the cinemas that we operated.

3:15So yeah, I think it is just a different world, different environment slightly. So I think give a bit of leeway to the Brits. Got to do it every now and again. Absolutely. Well, speaking of hot weather, talking about the hot news coming out in the sports world, Nick, and this story that we're going to cover today, it's actually twofold, but there is a common thread that runs between it. A couple of weeks back, we saw that there was news that Comcast and NBCUniversal were going to split. That was a move particularly amongst the telecoms tech stack that sits within Comcast and then the media content side of the business that sits within NBCUniversal.

3:47And then recently, just a few days ago here in the UK, we also saw news that Sky, who is a part of the Comcast family, has acquired ITV over here in the UK. So I think, Nick, just to quickly provide a little bit of context on the situation, sort of the threading together of all these things, is that about 15 years ago, Comcast was trying to build a bit of a media empire. trying to own the entire vertical, Comcast really being the telecoms business, acquired NBCUniversal across 2011 and 2013. The idea being that they would just own both the content and the means of distribution from the telecoms perspective.

4:20Five years later, in 2018, they acquired Sky across Europe. So that's the UK, Germany, Spain, and Italy, I believe, are the four key markets that they run over here. And at the time, that was a 30.6 billion pound acquisition. A lot of people claim that was quite the overpay at the time. But ultimately, at the end of the day, we've sort of seen these moves from Comcast ultimately trying to sort of build out their business in terms of having this verticalization of things. But now we've seen some of these stories, and we're going to cover these one by one, that leading on from that, this idea of own the pipes, own the content, own the customer, it really does feel like streaming has disrupted that model of what they were really, I think, probably trying to achieve in that moment.

5:03So, Nick, when we're kind of talking about particularly the splitting of the two companies between NBCUniversal and Comcast, given how intentional this strategy was of seeming to try to own the entire space, is this, I guess, in your eyes, kind of an admission perhaps that streaming has really changed the way the whole ecosystem needs to structure itself? yeah i think so i think that alongside what big tech has brought to the table with all these different platforms that people consume on now the whole ecosystem has been turned on its head over the last decade decade or so um comcast obviously built a really interesting and comprehensive verticalized business and there's been other examples of it well but we're now seeing in various industries including actually in the uk where bt sold off and spun off its um its streaming business to get out of that game and focus just on its telco.

5:59I think basically we've come to a point now where businesses that have a telco element or a broadband element, what do you call it? The pipes, I think was the word you used. Basically, it's about content. Content business and the pipes don't necessarily need to go hand in hand. We're going to talk about ITV and Sky later, but the ITV studios part of the business is worth more than the actual platform itself. And that would have been unthinkable a few years ago. But it does feel like that the value in the mindset of investors and whatnot has changed from not trying to be the platform of choice to being a content machine and running a really optimized operation.

6:37So basically Comcast has decided to take it on the chin. All the money they spent all those years ago is now coming basically a return on the sale and diversification at a fraction of what they spent back then. And who knows what's next for that. But it is quite a change up to where we were. And it feels like the whole merger and acquisition side of this marketplace is going to continue. Yeah, we've definitely seen that to your point. And often, you know, even in other stores we've seen, well, who was it, Nick? I always forget. It's IMG Arena where there was the acquisition, but it was because they wanted the content that was associated with it.

7:16You know, seeing more of these businesses where it might be an easier way to acquire rights. I think we even talked about DAZN's done some deals recently where they've acquired some businesses with the idea that I think it was with the RSNs where it might give them acquisition to sports rights they might not otherwise have. So we're seeing these businesses take these sort of similar moves, Nick. It does seem to be something happening more and more. But I guess for me, Nick, kind of the question this leans into this is, is this actually a positive news for the sports world? Because we keep talking about entertainment, but it feels like entertainment is becoming more and more sort of commoditized and available everywhere.

7:54when you start thinking about the sheer amount of content that exists on these platforms, whether that's original content or sub licensing, you know, more episodes of friends and things like that. Does that actually now mean that sports is arguably the single most valuable asset for these platforms? Because we talk about the power of live sports being one of the few things that might still be appointment viewing. I mean, Nick, it's hard to even think of appointment viewing these days because of streaming. Do these sorts of things actually help the value of sports? oh it's a good question um it's a difficult one to answer i'd say in some ways it does in some ways it doesn't the ways it it does is that there's a commitment by all these parties you you hear it they it's one of the priorities in every message when these deals are happening that sports is one of the key things they are focused on uh moving forward and every broadcaster and advertiser will tell you that there's i want to say and i guess this new romance or or like reinforced romance with sports as this emotional driver of audiences that's going to be bringing both subscribers and advertising dollars to the fore and therefore driving up and maintaining the value of media rights again which is a far cry from where we were a few years ago where there was not much light at the end of tunnel for some of these rights particularly in the US there seems to be more and more momentum in that in that space um and on the flip side of it I I guess, you know, whenever there's some acquisition or some, sorry, some merger stuff happening, that means there is innately less competition in the market.

9:22When there's less competition for rights, that means that sports will have to try and generate more competitive tension in other ways if they want to try and drive up the value of their rights in those negotiation rounds, particularly at the top tier of the industry. So in some ways, it's good in terms of, I think that there's reinforcement of the value of sports and the change that say someone like Comcast is trying to make is trying to make it look and run a bit more profitable and clearer to investors on what part of the businesses are successful and what ones are decaying. But I don't know.

9:57I think the jury's out here. I like the Sky. We're going to talk about Sky and ITV in a second. I like that connectiveness between those two. The Concast side with all the diversification and the Versaunt Media where they announced that spinoff a couple of years ago with a recent announcement they've just acquired uh was it full swing for like a half a billion dollars from brewing capital there's there's all sorts of different layers to the comcast uh ecosystem that they've had and now all these spinoffs that i'm trying to get my my head around a little bit yeah well we'll switch over to the sky uh news now and you know on the surface it may just look like a traditional acquisition that someone you know like Sky has acquired another business.

10:38But I guess the real interesting part about this, Nick, is Sky that we've talked about on many occasions on this is a subscription-based business. It's pay TV, whereas ITV is free to air. So now all of a sudden, all these things that we've been talking about, Nick, we're talking about expanding reach. We've talked about how much we think advertising is going to play in the future. And ITV also has their own streaming capabilities, the same way Sky does. What does Sky gain from the ITV deal that it couldn't necessarily achieve on its own? Well, Sky has such an incredible portfolio of rights, like by far the number one in the UK by some stretch.

11:16And they've been able to build a really profound and robust bundled and subscription business that feeds off of that. But we've talked about the value of rights in different capacities. And one thing that happens with a bundled pay TV business like that, particularly in this day and age around with subscription fatigue playing a role in decision making is there's probably a lot of wastage to or missed opportunity by skype and not being able to use those rights more actively in a free-to-air setting and what better setting than itv one of the one of the uk's premier free-to-air channels to be able to use that as a as a shop window to their content but also to be able to use it for advertising sales purposes frankly lean into itv's expertise and reach there.

11:58So think about what they can do with rights like, for example, the Premier League and having, you know, it could be a game of the week or a couple of games of the week and all of a sudden being able to bring out advertising revenue into that to the level they could find that sweet spot where they don't have to, they put a couple of games on there, enough that if you want to subscribe, you will still continue to subscribe. But it can just open up a whole new audience and a new set of revenue to maximize the value of their significant investment they've made into the Premier League rights and they continue to be the Premier League's number one supporter.

12:31So that is a huge win, a huge extension of what they're doing. I mean, look, we've looked at some of the other streaming platforms and some of them have taken different initiatives where they have some content behind a paywall and some in front of the paywall to try and maximize the value of those rights rather than just putting it all into one space and this allows sky so much more flexibility uh to do so so i think it's a huge win for them to be able to maximize particularly the sporting investments that they do have because let's face it they're also the ones that cost the most yeah well it reminds me something you know even they're they're within their own comcast family in the states they do that similar approach with peacock you know nbc has acquired rights some stuff sits behind the paywall on peacock some stuff they're able to put on their free to air channels on nbc we've also seen this within and ESPN and Disney where there's the ESPN plus sort of streaming platform of things that sit there but when the time's right they can flex those things onto their their free-to-air channels on ABC that you know for me I've been screaming and shouting from the roof one of my biggest frustrations is the biggest sport in the country or the UK not a single game is available free-to-air well that's because Sky owned everything or TNT now HBO Max owned the other bits well now all of a sudden I would be I personally Nick I'm just gonna put it I would be personally disappointed within the next three years if this deal has gone through we don't have some sort of game of the week um something that sits on free and air on itv like i would personally be disappointed i'd be disappointed i would just be shocked if that was the case i think frankly it's a win for everyone involved it's a win for the consumer it's a win for sky to be able to get more value out of it and obviously itv is as a platform um and the private league can really benefit from that extra reach and visibility innately and they should be able to drive up the value of that deal that they have with Sky if they have multiple channels of maximization and they can they can pull on pull on so I'm not sure the one thing I do would say is I'm not sure whether in the current agreement if this allows Sky to do it today but in the future I would say that that would almost be certain to be a stipulation in the contracts that they would be allowed to do that I just haven't I can't say I've had access to that those media rights agreements but my my guess is that there might be some gray in there before Sky has historically in previous agreements have the ability to put some games free to air but i don't think they've been leaning into that for quite some time so maybe it's not in there at the moment yeah and you mentioned it there just sort of the potential new monetization models that could exist because to your point i'm sure the premiere this isn't just about you know sky and itv this is just as much about the premier league or the partners they have with formula one the pga tour they have all these relationships where i'm sure that those rights holders are just as equal equally interested in that reach so just kind of of where this could potentially go in terms of those additional monetization options or expanding advertising.

15:15I mean, I hate to say this, but like maybe this bring, you know, things like golf much easier to include advertising, but like we're seeing the hydration breaks right now in the FIFA world cup. And I think you and I pretty much pretty confidently say we're anticipating that's probably going to be rolled out even further across European sports. Like this almost feels like the perfect opportunity to do so, but just some of the just further monetization that can exist now because of the the flexibility that the itv platform has with its reach and its uh free to air um i guess uh presence yeah i mean that's probably one of the reasons we look to germany right where sky is actually just i mean it's interesting right they've just made this acquisition here to build this um so dual approach and then you look towards what's happened in germany where sky's been sold off basically to rtl but to create kind of the same pay tv advertising duopoly, I suppose, if you want to call it that, where they have different ways of maximizing the content they've got in their portfolio.

16:14So in many ways, that pay TV component or that pay TV free to air relationship mirrors a lot of what the German was, even though that one in that instance is actually Sky washing their hands of Sky Deutschland and moving on from that altogether. So it is interesting. Obviously, the nuance with the UK market is that basically, whilst it is a pay tv business it's also one of the best and most um uh profound uh subscription uh bundled offer offerings with as a telco and broadband provider so it is a little bit of a different one to the german market but it definitely gives them i guess a variety of different levers they they can pull it will allow them to do things like when they're talking to yeah for example the champions league right so recently um uh champions league has obviously done a deal with paramount uh they paramount own i think is it channel four i believe they own as well so they've got that free to air component that would have been i think a challenge for sky to try and compete with that without having that free to air opportunity and we saw what bt or the hbo max guys did by deciding to not broadcast free to air despite the uefa's desire to have that visible there so if they want to start bidding for champions league rights i think having that channel to market to get things free to air will definitely be something that's pretty essential and maybe even open up the door for sky to bid for some of the world cup rights or even olympics in the future depending on how much they want to expand their prevalence in um in the uk or just double down on what they've got already well i think that leads nicely kind of the last angle to look at this story on nick is sort of who should be most worried about these moves in the sense of it's not as if sky wasn't intimidating enough in the uk market you know we could look at the zone who've been unsuccessful largely because the premier league's been able to just dominate the space but the fact that they are now potentially opening up this free to air component you know how threatening of a move is that to someone like an hbo max who's going to be looking to expand um their market share within the uk to zone who's still trying to really get a foothold here or even things that we've seen with bbc and youtube you know how alarming you know might it be that sky is even further expanding their potential reach in the market well yeah as you're saying Basically, Sky's already been the dominant player in this market.

18:27And I think who's the major competitors in the UK realistically for them? DAZN's not a competitor in the market yet. And they frankly aren't. You aren't if you don't have Premier League rights. And they're not going to be ready to bid for those anytime or soon, you wouldn't think. The BBC is a public service broadcaster. They can't really be competing with ITV and Sky in the same way, despite what people might often do is compare BBC and ITV together. And it's understandable. But I don't think you can really say they're competing with each other. Paramount is probably the only one I would say with that Channel 4 relationship that is now seems to be leaning into that competitive space.

19:05And we don't know how much Paramount is going to lean into the competitive landscape more. But otherwise, it's the big tech companies. And the big tech companies will probably be a little bit disappointed that there's a bit more of muscle behind one of their competitors. but i think they're so global and scale that it wouldn't probably be a huge thing on their radar at the same time as well the only reason it might be more important to them is if they are in the future considering to do some acquisitions themselves of some of these companies but i can't see them doing it anytime soon yeah well nick i guess the next interesting part about the story it's the one that we can't answer today but we will keep an eye on is how quickly some of this stuff comes because you know is it to your point do the current deals not offer the flexibility for the premier league to be a part of this where we have to wait until the next cycle or is it something um that can be immediately implemented you know as early as a season or what that means for things like formula one or pga tour you know the you know hell even the nfl you know do they start putting that on there because they've got their own designated channel so i think that's the one that we'll need to keep an eye on and obviously we will cover that as we always do but that I guess is really the question is how quickly some of this stuff can get turned around and then just for us just see the interest of how well that can perform because I would certainly be really keen to see some of the results on that finally seeing some sports that have long been behind a paywall potentially starting to be drip fed into a free-to-air perspective here in the UK well yeah I mean it's still it is definitely going to be interesting what happens from here there's you know there's rumors that ITV and BBC have been talking also about creating a dual localised service basically to try and compete with the major big tech companies and whether that still would be on their radars.

20:49So I think there's plenty of things still up in the air and how quickly they can get a deal done. So there's some speculation as to whether this deal would get approved because of anti-competitive laws. I can't see why that would be an issue given all the other stuff we've been seeing in the market, frankly. But yeah, there's a lot of layers to this. There's the ITV studios that have been pulled out of the ITV business that I think they value something like a couple of billion dollars that business as its loan and it just shows how the value of um basically the value of content is so profound these days they also have they end up with a 20 stake in itn which is basically producing content for a whole bunch of broadcasters right across the globe and across um across the uk so there's a lot of layers and facets to this this deal and quite frankly i was quite surprised at how little sky had to pay for itv given its prominence and prevalence i would have thought they would be worth a little bit more than that but hey uh i don't have a few billion lying around to outbid sky so uh they haven't seen um fair play to them for being able to get the deal done absolutely well there's like you said this is a story that we will keep an eye on and we'll keep you updated as we get more news on it but thank you once again everybody for joining us for this episode of stream time sports